KUALA LUMPUR: Malaysian palm oil futures rose for a second straight session on Monday to hover near record highs, as expectation of more demand from India grew amid tight supply after the world's top edible oil buyer cut its import tax.
The benchmark palm oil contract for April delivery on the Bursa Malaysia Derivatives Exchange gained 90 ringgit, or 1.61%, to 5,663 ringgit ($1,351.55) a tonne by the midday break.
India on Sunday reduced its tax on crude palm oil (CPO) imports, known as the Agriculture Infrastructure and Development Cess (AIDC), to 5% from 7.5% to rein in local prices and help domestic refiners and consumers.
Palm oil remains neutral in 5,524-5,608 ringgit range
The tax reduction comes after Malaysian palm oil prices soared to record highs last week, making the vegetable oil less competitive over rival edible oils.
"It would be interesting to see if India increases palm oil buying after the reduction in CPO import duties, or continue to look after soft oils as palm oil is at a high premium, especially over sun oil," said Anilkumar Bagani, research head of Mumbai-based vegetable oils broker Sunvin Group.
Additionally, the conflict between Russia and the West over Ukraine is threatening the supply of sun oil from the Black Sea region and also fuelling a rally in crude oil prices, Bagani said.
Oil prices hit their highest in more than seven years on fears that a possible invasion of Ukraine by Russia could trigger US and European sanctions that would disrupt exports from the world's top producer.
In other related oils, Dalian's May soyoil contract rose 0.9%, while its May palm oil contract gained 2%. May soyoil prices on the Chicago Board of Trade were up 0.9%.
Palm oil remains neutral in a range of 5,524-5,608 ringgit per tonne, and an escape could suggest a direction, Reuters technical analyst Wang Tao said.
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